Acct 4420 Chapter 5 new

Acct 4420 Chapter 5 new - Acct4420 Chapter5InternalControl

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Acct 4420 Chapter 5 Internal Control  Over Financial Reporting
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Chapter 6 Internal Control  Over Financial Reporting The second standard of fieldwork states that: A sufficient understanding of internal control is to  be obtained to plan the audit and to determine the  nature, time, and extent of tests to be performed. Chapter 5 page 2
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So, GAAS require that the auditor: Review (obtain an understanding) of each component of internal control sufficient to plan audit. Assess control risk at the financial statement level to determine detection risk and at the account balance and transaction class level. Chapter 5 page 3
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Reasons that an auditor is interested in internal control: It relates to the company’s ability to record, process, summarize and report financial data consistent with assertions in the financial statements. It pertains to data that the auditor will use in his/her audit procedures. For companies with publicly traded securities, SOX requires an integrated audit. Chapter 5 page 4
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Internal Control – Integrated  Framework A process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories. Reliable financial reporting Effectiveness and efficiency of operations Various business, company specific, such as use of resources in operations Control environment Risk assessment Control activities Monitoring Information and communication Reliable financial annual and interim reports (e.g., GAAP) Compliance with laws and regulations Compliance with laws and regulations that apply to the company Control environment Risk assessment Control activities Monitoring Information and communication Control environment Control environment Risk assessment Risk assessment Control activities Control activities Monitoring Monitoring Information and Information and communication communication Definition Objectives Categories Objectives Components Chapter 5 page 5
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Control Environment The tone at the top: Represents management’s (and the BOD’s) attitude toward, awareness of, and actions concerning the internal control structure. Regarded as the foundation of internal control because if management is not
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This note was uploaded on 09/20/2011 for the course ACCT 4420 taught by Professor Franz during the Spring '11 term at Toledo.

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Acct 4420 Chapter 5 new - Acct4420 Chapter5InternalControl

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